Pilgrim’s Pride Corporation (NASDAQ:PPC) Q1 2022 Earnings Conference Call April 28, 2022 9:00 AM ET Company Participants Andy Rojeski – Head-Strategy, Investor Relations and Net Zero Programs Fabio Sandri – President and Chief Executive Officer Matt Galvanoni – Chief Financial Officer Conference Call Participants Ben Bienvenu – Stephens Peter Galbo – Bank of America Michael Piken – Cleveland Research Ben Theurer – Barclays Adam Samuelson – Goldman Sachs Ken Zaslow – Bank of Montreal Operator Good morning a ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=2&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company presents its unaudited condensed consolidated financial statements for the first quarters of 2022 and 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $725,540 | $427,661 | | Total current assets | $3,792,825 | $3,305,954 | | Total assets | $9,317,867 | $8,913,205 | | **Liabilities & Equity** | | | | Total current liabilities | $2,475,775 | $2,390,823 | | Long-term debt, less current maturities | $3,377,893 | $3,191,161 | | Total liabilities | $6,524,261 | $6,324,271 | | Total stockholders' equity | $2,793,606 | $2,588,934 | | Total liabilities and stockholders' equity | $9,317,867 | $8,913,205 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Net sales | $4,240,395 | $3,273,425 | | Cost of sales | $3,698,415 | $3,012,182 | | Gross profit | $541,980 | $261,243 | | Operating income | $402,013 | $158,464 | | Income before income taxes | $355,779 | $135,826 | | Net income | $280,560 | $100,468 | | Net income attributable to Pilgrim's Pride Corporation | $280,438 | $100,208 | | Diluted EPS | $1.15 | $0.41 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Net income | $280,560 | $100,468 | | Total other comprehensive income (loss), net of tax | $(50,905) | $57,899 | | Comprehensive income | $229,655 | $158,367 | | Comprehensive income attributable to Pilgrim's Pride Corporation | $229,533 | $158,107 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Balance at December 26, 2021 / December 27, 2020 | $2,588,934 | $2,575,347 | | Net income | $280,438 | $100,208 | | Other comprehensive loss, net of tax | $(50,905) | $57,899 | | Common stock purchased under share repurchase plan | $(27,023) | — | | Balance at March 27, 2022 / March 28, 2021 | $2,793,606 | $2,735,756 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $226,996 | $(143,551) | | Cash used in investing activities | $(85,576) | $(89,093) | | Cash provided by financing activities | $166,330 | $92,990 | | Increase (decrease) in cash, cash equivalents and restricted cash | $305,677 | $(138,166) | | Cash, cash equivalents and restricted cash, end of period | $755,798 | $410,240 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=1.%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Pilgrim's Pride Corporation is a global chicken producer with operations in the U.S., U.K., Mexico, France, Puerto Rico, Netherlands, and Republic of Ireland, selling products to foodservice, retail, and frozen entrée customers[24](index=24&type=chunk) - As of March 27, 2022, the company had over **59,000 employees** and processed approximately **43.3 million birds** and **49,500 pigs** per 5-day work week[24](index=24&type=chunk) - JBS S.A. beneficially owned **80.5%** of the Company's outstanding common stock as of March 27, 2022[24](index=24&type=chunk) - The company adopted ASU 2021-10, Government Assistance, which requires annual disclosures for government assistance transactions, but it did not have a material impact on the financial statements[33](index=33&type=chunk) - The company will apply ASU 2020-04 and ASU 2021-01, Reference Rate Reform, to update contracts and hedging relationships affected by the transition from LIBOR to new reference rates, with the option to apply the guidance through December 31, 2022[34](index=34&type=chunk) [2. BUSINESS ACQUISITION](index=9&type=section&id=2.%20BUSINESS%20ACQUISITION) - On September 24, 2021, Pilgrim's acquired 100% of Kerry Consumer Foods' meats and meals businesses (Pilgrim's Food Masters, PFM) for **£695.3 million ($954.1 million)**, solidifying its position as a leading European food company[35](index=35&type=chunk) - During Q1 2022, an additional **$4.8 million** was paid for working capital and net debt adjustments, bringing the total cash paid to **$958.9 million**[35](index=35&type=chunk) - The acquisition generated **$260.7 million in net sales** and **$1.9 million in net income** for the three months ended March 27, 2022, and resulted in **$353.4 million in goodwill**, driven by strategic and synergistic benefits[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) [3. REVENUE RECOGNITION](index=10&type=section&id=3.%20REVENUE%20RECOGNITION) - The Company's revenue is primarily from product sales, with performance obligations typically fulfilled within days to weeks of order acceptance, upon transfer of control to the customer (destination or pick-up)[42](index=42&type=chunk)[43](index=43&type=chunk) Disaggregated Net Sales by Segment and Product Type (Three Months Ended March 27, 2022 vs. March 28, 2021) | Segment | Product Type | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | :--- | | **U.S.** | Fresh | $2,087,621 | $1,597,423 | | | Prepared | $255,087 | $194,272 | | | Export | $133,797 | $113,971 | | | Other | $104,703 | $93,893 | | | **Total U.S.** | **$2,581,208** | **$1,999,559** | | **U.K. and Europe** | Fresh | $237,309 | $386,886 | | | Prepared | $746,636 | $376,122 | | | Export | $173,411 | $79,382 | | | Other | $34,626 | $12,345 | | | **Total U.K. and Europe** | **$1,191,982** | **$854,735** | | **Mexico** | Fresh | $410,420 | $372,721 | | | Prepared | $36,141 | $27,404 | | | Other | $20,644 | $19,006 | | | **Total Mexico** | **$467,205** | **$419,131** | | **Total Net Sales** | | **$4,240,395** | **$3,273,425** | Changes in Revenue Contract Liabilities (In thousands) | Item | Amount | | :--- | :--- | | Balance as of December 26, 2021 | $22,321 | | Revenue recognized | $(11,537) | | Cash received, excluding amounts recognized as revenue during the period | $10,738 | | Balance as of March 27, 2022 | $21,522 | [4. DERIVATIVE FINANCIAL INSTRUMENTS](index=12&type=section&id=4.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) - Pilgrim's uses exchange-traded futures and options to mitigate price risk for commodity inputs (corn, soybean meal, soybean oil, wheat, natural gas, electricity, diesel fuel) for approximately the next twelve months[52](index=52&type=chunk)[53](index=53&type=chunk) - The Company uses foreign currency forward contracts to manage translational foreign exchange risk from its Mexico, U.K., France, Netherlands, and Republic of Ireland operations, and an interest rate swap to manage variable interest rate exposure on U.S. long-term debt[54](index=54&type=chunk)[55](index=55&type=chunk) Fair Values of Derivative Instruments (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Commodity derivative assets | $37,563 | $17,567 | | Commodity derivative liabilities | $(22,860) | $(14,119) | | Foreign currency derivative assets | $768 | $518 | | Foreign currency derivative liabilities | $(12,197) | $(4,958) | | Interest rate swap derivative liabilities | — | $(98) | | Sales contract derivative liabilities | $(21,357) | $(12,691) | | Cash collateral posted with brokers | $30,258 | $22,459 | Gains and Losses from Undesignated Derivative Instruments (Three Months Ended March 27, 2022 vs. March 28, 2021) | Type of Contract | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | Affected Line Item | | :--- | :--- | :--- | :--- | | Foreign currency derivatives gain (loss) | $(13,300) | $5,340 | Foreign currency transaction losses (gains) | | Commodity derivative gain | $31,540 | $17,378 | Cost of sales | | Sales contract derivative gain (loss) | $(8,666) | $(18,104) | Net sales | | Total | $9,574 | $4,614 | | [5. TRADE ACCOUNTS AND OTHER RECEIVABLES](index=15&type=section&id=5.%20TRADE%20ACCOUNTS%20AND%20OTHER%20RECEIVABLES) Trade Accounts and Other Receivables, Net (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Trade accounts receivable | $1,001,967 | $947,697 | | Notes receivable | $18,946 | $18,697 | | Other receivables | $59,900 | $56,716 | | Receivables, gross | $1,080,813 | $1,023,110 | | Allowance for credit losses | $(9,711) | $(9,673) | | Receivables, net | $1,071,102 | $1,013,437 | | Accounts receivable from related parties | $1,079 | $1,345 | Activity in Allowance for Credit Losses (Three Months Ended March 27, 2022) | Item | Amount (In thousands) | | :--- | :--- | | Balance, beginning of period | $(9,673) | | Provision charged to operating results | $(383) | | Account write-offs and recoveries | $487 | | Effect of exchange rate | $(142) | | Balance, end of period | $(9,711) | [6. INVENTORIES](index=16&type=section&id=6.%20INVENTORIES) Inventories (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Raw materials and work-in-process | $1,124,232 | $1,034,518 | | Finished products | $410,784 | $369,292 | | Operating supplies | $87,822 | $87,332 | | Maintenance materials and parts | $86,157 | $84,516 | | Total inventories | $1,708,995 | $1,575,658 | [7. INVESTMENTS IN SECURITIES](index=16&type=section&id=7.%20INVESTMENTS%20IN%20SECURITIES) Investments in Available-for-Sale Securities (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 Cost (In thousands) | March 27, 2022 Fair Value (In thousands) | December 26, 2021 Cost (In thousands) | December 26, 2021 Fair Value (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed income securities (Cash equivalents) | $29,048 | $29,048 | $48,851 | $48,851 | - Gross realized gains on available-for-sale securities were immaterial for the three months ended March 27, 2022, and March 28, 2021[71](index=71&type=chunk) [8. GOODWILL AND INTANGIBLE ASSETS](index=16&type=section&id=8.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill by Segment (March 27, 2022 vs. December 26, 2021) | Segment | December 26, 2021 (In thousands) | Additions (In thousands) | Currency Translation (In thousands) | March 27, 2022 (In thousands) | | :--- | :--- | :--- | :--- | :--- | | U.S. | $41,936 | — | — | $41,936 | | U.K. and Europe | $1,167,512 | $4,570 | $(21,722) | $1,150,360 | | Mexico | $127,804 | — | — | $127,804 | | Total | $1,337,252 | $4,570 | $(21,722) | $1,320,100 | - Additions to goodwill primarily reflect working capital adjustments from prior year business acquisitions[72](index=72&type=chunk) Intangible Assets, Net (March 27, 2022 vs. December 26, 2021) | Item | December 26, 2021 (In thousands) | Additions (In thousands) | Amortization (In thousands) | Currency Translation (In thousands) | March 27, 2022 (In thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Trade names not subject to amortization | $609,713 | — | — | $(6,939) | $602,774 | | Trade names subject to amortization | $114,268 | — | $(1,076) | $(4,578) | $109,690 | | Customer relationships | $455,459 | — | $(7,622) | $(5,738) | $449,721 | | Non-compete agreements | $320 | — | — | — | $320 | | Accumulated amortization | $(216,517) | — | $(8,698) | $1,274 | $(223,941) | | Intangible assets, net | $963,243 | — | $(8,698) | $(15,981) | $938,564 | - Intangible assets are amortized over estimated useful lives: Customer relationships (3-18 years), Trade names subject to amortization (15-20 years), and Non-compete agreements (3 years)[73](index=73&type=chunk) [9. PROPERTY, PLANT AND EQUIPMENT](index=17&type=section&id=9.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) Property, Plant and Equipment, Net (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Land | $262,409 | $260,079 | | Buildings | $2,051,418 | $2,043,034 | | Machinery and equipment | $3,608,105 | $3,594,482 | | Autos and trucks | $76,700 | $76,710 | | Finance leases | $5,710 | $5,710 | | Construction-in-progress | $236,304 | $229,837 | | PP&E, gross | $6,240,646 | $6,209,852 | | Accumulated depreciation | $(3,350,630) | $(3,292,046) | | PP&E, net | $2,890,016 | $2,917,806 | - Depreciation expense was **$93.4 million** for the three months ended March 27, 2022, up from $80.7 million in the prior year period[74](index=74&type=chunk) - Capital expenditures totaled **$81.6 million** in Q1 2022, primarily for efficiency improvements and cost reduction, with $73.8 million of completed projects transferred from construction-in-progress[75](index=75&type=chunk) - The Company recognized an additional impairment loss of **$0.2 million** due to tornado damage to two hatcheries and a feed mill in Mayfield, Kentucky, in December 2021[77](index=77&type=chunk) [10. CURRENT LIABILITIES](index=18&type=section&id=10.%20CURRENT%20LIABILITIES) Current Liabilities (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Total accounts payable | $1,440,802 | $1,378,077 | | Accounts payable to related parties | $8,044 | $22,317 | | Revenue contract liabilities | $21,522 | $22,321 | | Accrued expenses and other current liabilities | $815,259 | $859,885 | | Total | $2,285,627 | $2,282,600 | - Accrued expenses and other current liabilities include significant amounts for compensation and benefits (**$184.4 million**), current maturities of operating lease liabilities (**$79.1 million**), taxes (**$77.2 million**), insurance and self-insured claims (**$73.3 million**), litigation settlements (**$69.0 million**), and derivative liabilities (**$56.4 million**) as of March 27, 2022[79](index=79&type=chunk) [11. INCOME TAXES](index=19&type=section&id=11.%20INCOME%20TAXES) Income Tax Expense and Effective Tax Rate (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Income tax expense | $75,219 | $35,358 | | Effective tax rate | 21.1% | 26.0% | - The increase in income tax expense in Q1 2022 was primarily due to an **increase in profit before income taxes**[80](index=80&type=chunk) - As of March 27, 2022, the Company did not believe it had sufficient positive evidence to conclude that realization of a portion of its foreign net deferred tax assets are more likely than not to be realized[81](index=81&type=chunk) [12. DEBT](index=19&type=section&id=12.%20DEBT) Long-term Debt and Other Borrowing Arrangements (March 27, 2022 vs. December 26, 2021) | Item | Maturity | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | :--- | | Senior notes payable at 3.50% | 2032 | $900,000 | $900,000 | | Senior notes payable, net of discount, at 4.25% | 2031 | $990,941 | $990,691 | | Senior notes payable, net of discount, at 5.875% | 2027 | $846,045 | $845,866 | | Term note payable at 2.09% (U.S. Credit Facility) | 2026 | $692,812 | $506,250 | | Pilgrim's Pride Limited Bank of Ireland Invoice Discounting Facility | 2022 | $9,911 | — | | Finance lease obligations | Various | $4,320 | $4,548 | | Long-term debt | | $3,444,029 | $3,247,358 | | Less: Current maturities of long-term debt | | $(36,162) | $(26,246) | | Long-term debt, less current maturities, net of capitalized financing costs | | $3,377,893 | $3,191,161 | - The Company has an **$800.0 million revolving credit commitment** and a **$700.0 million term loan commitment** under the U.S. Credit Facility, maturing on August 9, 2026[93](index=93&type=chunk)[95](index=95&type=chunk) - As of March 27, 2022, **$692.8 million** was outstanding under the term loan, and **$763.9 million** was available under the revolving credit commitment[93](index=93&type=chunk)[95](index=95&type=chunk) - The U.S. Credit Facility is secured by first priority liens on substantially all present and future personal property and assets of the Company and its guarantors[98](index=98&type=chunk) [13. STOCKHOLDERS' EQUITY](index=22&type=section&id=13.%20STOCKHOLDERS'%20EQUITY) Changes in Accumulated Other Comprehensive Income (Loss) (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | Balance, beginning of period | $(47,997) | $(20,620) | | Other comprehensive income before reclassifications | $(51,200) | $57,651 | | Amounts reclassified from accumulated other comprehensive income to net income | $290 | $236 | | Currency translation | $5 | $12 | | Net current period other comprehensive income (loss) | $(50,905) | $57,899 | | Balance, end of period | $(98,902) | $37,279 | - On March 8, 2022, the Board approved a **$200.0 million share repurchase authorization**[110](index=110&type=chunk) - As of March 27, 2022, the Company repurchased approximately **1.2 million shares for $27.0 million**[110](index=110&type=chunk) - Both the U.S. Credit Facility and senior notes indentures restrict, but do not prohibit, dividend declarations[111](index=111&type=chunk) [14. PENSION AND OTHER POSTRETIREMENT BENEFITS](index=23&type=section&id=14.%20PENSION%20AND%20OTHER%20POSTRETIREMENT%20BENEFITS) - Total expenses for all retirement plans were **$6.4 million** for the three months ended March 27, 2022, up from $5.3 million in the prior year period[113](index=113&type=chunk) Defined Benefit Plans - Funded Status (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | Unfunded benefit obligation, end of period (Pension Benefits) | $(34,134) | $(46,653) | | Unfunded benefit obligation, end of period (Other Benefits) | $(1,268) | $(1,346) | | Recognized liability (Pension Benefits) | $(34,134) | $(46,653) | | Recognized liability (Other Benefits) | $(1,268) | $(1,346) | - The accumulated benefit obligation for defined benefit pension plans was **$340.8 million** at March 27, 2022, with all plans having obligations exceeding plan assets[115](index=115&type=chunk) - The Company anticipates contributing **$4.2 million** to its pension plans and **$0.2 million** to other postretirement plans during the remainder of 2022[133](index=133&type=chunk) - The Company's expenses related to its defined contribution plans totaled **$5.5 million** in Q1 2022, up from $4.6 million in Q1 2021[139](index=139&type=chunk) [15. FAIR VALUE MEASUREMENT](index=30&type=section&id=15.%20FAIR%20VALUE%20MEASUREMENT) Fair Value Measurements of Financial Instruments (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 Level 1 (In thousands) | March 27, 2022 Level 2 (In thousands) | March 27, 2022 Total (In thousands) | December 26, 2021 Level 1 (In thousands) | December 26, 2021 Level 2 (In thousands) | December 26, 2021 Total (In thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Assets:** | | | | | | | | Commodity derivative assets | $37,563 | — | $37,563 | $17,567 | — | $17,567 | | Foreign currency derivative assets | $768 | — | $768 | $518 | — | $518 | | **Liabilities:** | | | | | | | | Commodity derivative liabilities | $(22,860) | — | $(22,860) | $(14,119) | — | $(14,119) | | Foreign currency derivative liabilities | $(12,197) | — | $(12,197) | $(4,958) | — | $(4,958) | | Interest rate swap derivative liabilities | — | — | — | — | $(98) | $(98) | | Sales contract derivative liabilities | — | $(21,357) | $(21,357) | — | $(12,691) | $(12,691) | Carrying Amounts and Estimated Fair Values of Fixed-Rate Debt (March 27, 2022 vs. December 26, 2021) | Item | March 27, 2022 Carrying Amount (In thousands) | March 27, 2022 Fair Value (In thousands) | December 26, 2021 Carrying Amount (In thousands) | December 26, 2021 Fair Value (In thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed-rate senior notes payable at 3.50% | $(900,000) | $(782,721) | $(900,000) | $(915,120) | | Fixed-rate senior notes payable at 4.25% | $(990,941) | $(913,380) | $(990,691) | $(1,055,140) | | Fixed-rate senior notes payable at 5.875% | $(846,045) | $(853,562) | $(845,866) | $(900,193) | | Secured loans | — | — | $(3) | $(3) | [16. RELATED PARTY TRANSACTIONS](index=31&type=section&id=16.%20RELATED%20PARTY%20TRANSACTIONS) Sales to Related Parties (Three Months Ended March 27, 2022 vs. March 28, 2021) | Related Party | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | JBS USA Food Company | $4,611 | $3,065 | | Combo, Mercado de Congelados | $683 | $451 | | JBS Australia Pty. Ltd. | $532 | $883 | | JBS Chile Ltda. | $52 | $88 | | Total sales to related parties | $5,878 | $4,487 | Cost of Goods Purchased from Related Parties (Three Months Ended March 27, 2022 vs. March 28, 2021) | Related Party | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | JBS USA Food Company | $61,903 | $56,249 | | Penasul UK LTD | $3,540 | $2,318 | | JBS Asia Co Limited | $2,124 | $5 | | Seara Meats B.V. | $1,468 | $1,701 | | JBS Food Trading (Shanghai) Limited | $47 | — | | Vivera B.V. | $15 | — | | JBS Global (U.K.) Ltd. | — | $369 | | Total cost of goods purchased from related parties | $69,097 | $60,642 | Accounts Receivable from Related Parties (March 27, 2022 vs. December 26, 2021) | Related Party | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | JBS USA Food Company | $778 | $1,059 | | JBS Australia Pty. Ltd. | $245 | $200 | | JBS Chile Ltda. | $53 | $2 | | Combo, Mercado de Congelados | $3 | $84 | | Total accounts receivable from related parties | $1,079 | $1,345 | Accounts Payable to Related Parties (March 27, 2022 vs. December 26, 2021) | Related Party | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | JBS USA Food Company | $3,249 | $21,628 | | Penasul UK LTD | $2,244 | $147 | | JBS Asia Co Limited | $2,087 | — | | Seara Meats B.V. | $464 | $534 | | JBS Chile Ltda. | — | $8 | | Total accounts payable to related parties | $8,044 | $22,317 | [17. REPORTABLE SEGMENTS](index=32&type=section&id=17.%20REPORTABLE%20SEGMENTS) - Pilgrim's operates in three reportable segments: U.S., U.K. and Europe, and Mexico[153](index=153&type=chunk) - Segment profit is measured as operating income, with corporate expenses allocated based on specific expenditures[153](index=153&type=chunk) Net Sales by Reportable Segment (Three Months Ended March 27, 2022 vs. March 28, 2021) | Segment | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | U.S. | $2,581,208 | $1,999,559 | | U.K. and Europe | $1,191,982 | $854,734 | | Mexico | $467,205 | $419,132 | | Total | $4,240,395 | $3,273,425 | Reportable Segment Profit (Loss) (Three Months Ended March 27, 2022 vs. March 28, 2021) | Segment | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | | :--- | :--- | :--- | | U.S. | $355,075 | $68,125 | | U.K. and Europe | $(21,640) | $10,495 | | Mexico | $68,564 | $79,830 | | Total operating income | $402,013 | $158,464 | Total Assets by Reportable Segment (March 27, 2022 vs. December 26, 2021) | Segment | March 27, 2022 (In thousands) | December 26, 2021 (In thousands) | | :--- | :--- | :--- | | U.S. | $6,761,031 | $6,390,845 | | U.K. and Europe | $4,237,911 | $4,292,558 | | Mexico | $1,235,773 | $1,146,204 | | Eliminations | $(2,916,848) | $(2,916,402) | | Total assets | $9,317,867 | $8,913,205 | [18. COMMITMENTS AND CONTINGENCIES](index=34&type=section&id=18.%20COMMITMENTS%20AND%20CONTINGENCIES) - Pilgrim's is involved in various legal proceedings, including the In re Broiler Chicken Antitrust Litigation, where it has reached settlements with multiple plaintiff classes totaling **$195.5 million**[165](index=165&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - The Company continues to litigate against Opt Outs in the Broilers Litigation and has recognized an expense of **$489.8 million** for negotiated and potential settlements[169](index=169&type=chunk) - Pilgrim's is cooperating with DOJ investigations into antitrust matters, including a **$107.9 million fine** for conspiracy in restraint of competition related to broiler chicken sales, and a new civil investigation into human resources antitrust matters[183](index=183&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[190](index=190&type=chunk) - The Company faces ongoing litigation related to broiler chicken farmers, stockholder derivative actions, and class action lawsuits regarding Plant Workers' compensation, with a **$29.0 million settlement** reached for Plant Workers[177](index=177&type=chunk)[178](index=178&type=chunk)[180](index=180&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company analyzes its Q1 2022 financial performance, highlighting sales growth, inflationary pressures, and segment results [Executive Summary](index=39&type=section&id=Executive%20Summary) Key Financial Highlights (Three Months Ended March 27, 2022) | Metric | Amount (In millions) | | :--- | :--- | | Net income attributable to Pilgrim's | $280.4 | | Income before tax | $355.8 | | Net sales | $4,200.0 | | Gross profit | $500.0 | | Cash provided by operating activities | $227.0 | | Consolidated operating margin | 9.5% | | U.S. operating margin | 13.8% | | U.K. and Europe operating margin | (1.8)% | | Mexico operating margin | 14.7% | | EBITDA | $492.9 | | Adjusted EBITDA | $501.8 | - The company experienced solid volume recoveries in Q1 2022 due to easing COVID-19 restrictions but faced **significant inflation** in commodity, labor, and other operating costs, exacerbated by the Russia-Ukraine war[193](index=193&type=chunk) - JBS withdrew its unsolicited proposal to acquire all outstanding shares of PPC common stock not already owned by JBS on February 17, 2022, after the Special Committee deemed the revised offer of **$28.50 per share insufficient**[195](index=195&type=chunk) - The company continues to implement COVID-19 safety measures, all production facilities remain operational, and demand for products has returned to pre-pandemic levels[197](index=197&type=chunk) [Raw Materials and Pricing](index=40&type=section&id=Raw%20Materials%20and%20Pricing) - U.S. and Mexico segments primarily use corn and soybean meal for feed, while the U.K. and Europe segment uses wheat, soybean meal, and barley[199](index=199&type=chunk) - U.S. chicken market prices remained high in Q1 2022 due to **sustained demand**, mild production growth, and low cold storage stocks, despite increased industry production[200](index=200&type=chunk) - The U.K. chicken market faced **unprecedented cost increases** in feed, utilities, and labor, partially offset by customer negotiations and foodservice recovery[201](index=201&type=chunk) - Mexico chicken commodity prices increased due to demand outpacing supply, with higher input costs for feed[202](index=202&type=chunk) - U.K. pork product market prices remained low in Q1 2022 due to excess EU supply, though German prices increased by over **50%** late in the quarter[204](index=204&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Net Sales by Segment (Three Months Ended March 27, 2022 vs. March 28, 2021) | Segment | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | Change Amount (In thousands) | Change Percent | | :--- | :--- | :--- | :--- | :--- | | U.S. | $2,581,208 | $1,999,559 | $581,649 | 29.1% | | U.K. and Europe | $1,191,982 | $854,734 | $337,248 | 39.5% | | Mexico | $467,205 | $419,131 | $48,073 | 11.5% | | Total net sales | $4,240,395 | $3,273,425 | $966,970 | 29.5% | - U.S. net sales increased by **29.1%** primarily due to a **29.2 percentage point increase** in net sales per pound, driven by higher chicken commodity prices[207](index=207&type=chunk) - U.K. and Europe net sales increased by **39.5%**, with **$260.7 million** from the PFM acquisition and **$76.5 million** from existing businesses, driven by price increases to offset inflation[208](index=208&type=chunk) - Mexico net sales increased by **11.5%**, mainly due to a **9.9 percentage point increase** in net sales per pound from higher chicken commodity prices and a **2.9 percentage point increase** in sales volume[209](index=209&type=chunk) Gross Profit and Cost of Sales (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | Change Amount (In thousands) | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Gross profit | $541,980 | $261,243 | $280,737 | 107.5% | | Cost of sales | $3,698,415 | $3,012,182 | $686,233 | 22.8% | - U.S. cost of sales increased by **15.7%** due to higher cost per pound sold, including a **$94.3 million increase** in feed costs and a **$22.6 million increase** in chick costs[211](index=211&type=chunk) - U.K. and Europe cost of sales increased by **41.1%** due to PFM acquisition costs and inflation in feed ingredients, utilities, and labor in existing operations[212](index=212&type=chunk) - Mexico cost of sales increased by **17.6%** due to higher input costs (feed ingredients) and an unfavorable product mix, partially offset by favorable foreign currency remeasurement[213](index=213&type=chunk) Operating Income and SG&A Expense (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In thousands) | March 28, 2021 (In thousands) | Change Amount (In thousands) | Change Percent | | :--- | :--- | :--- | :--- | :--- | | Operating income | $402,013 | $158,464 | $243,549 | 153.7% | | SG&A expense | $139,967 | $102,779 | $37,188 | 36.2% | - U.S. operating income increased by **421.2% to $355.1 million**, while U.K. and Europe operating income decreased by **306.2% to a loss of $(21.6) million**[215](index=215&type=chunk) - U.K. and Europe SG&A expense increased by **122.3%** primarily due to the PFM acquisition[218](index=218&type=chunk) - Net interest expense increased to **$35.0 million** in Q1 2022 from $28.0 million in Q1 2021, driven by a **$1.0 billion increase** in average borrowings to $3.38 billion, primarily for the PFM acquisition[220](index=220&type=chunk) - Income tax expense increased to **$75.2 million (21.1% effective tax rate)** in Q1 2022 from $35.4 million (26.0% effective tax rate) in Q1 2021, mainly due to increased profit before taxes[221](index=221&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Available Sources of Liquidity (As of March 27, 2022) | Source of Liquidity | Facility Amount (In millions) | Amount Outstanding (In millions) | Amount Available (In millions) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | — | — | $725.5 | | U.S. Credit Facility Revolving Note Payable | $800.0 | — | $763.9 | | U.S. Credit Facility Term Loans | $700.0 | $692.8 | $7.2 | | Mexico Credit Facility | $74.9 | — | $74.9 | | U.K. and Europe Credit Facilities | $131.8 | — | $131.8 | - The Company expects cash flows from operations and available credit facilities to provide sufficient liquidity for current obligations, working capital, debt maturities, and capital spending for at least the next twelve months[225](index=225&type=chunk) - A Mexican subsidiary received an observation letter from the Mexican Tax Authority regarding a withholding tax liability from a 2015 acquisition; the company plans to appeal any formal assessment[226](index=226&type=chunk) Cash Flows from Operating Activities (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In millions) | March 28, 2021 (In millions) | | :--- | :--- | :--- | | Net income | $280.6 | $100.5 | | Net noncash expenses | $85.8 | $100.0 | | Changes in operating assets and liabilities | $(139.4) | $(333.9) | | Cash provided by (used in) operating activities | $227.0 | $(143.6) | - Net noncash expenses for Q1 2022 included **$102.1 million** in depreciation and amortization, **$2.0 million** in stock-based compensation, and a **$21.9 million** deferred income tax benefit[228](index=228&type=chunk) - Changes in operating assets and liabilities resulted in a **$66.7 million use of cash** from trade accounts and other receivables (due to increased sales) and a **$146.0 million use of cash** from inventories (due to increased raw material costs) in Q1 2022[231](index=231&type=chunk)[232](index=232&type=chunk) Cash Flows from Investing Activities (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In millions) | March 28, 2021 (In millions) | | :--- | :--- | :--- | | Acquisitions of property, plant and equipment | $(81.6) | $(102.2) | | Purchase of acquired businesses, net of cash acquired | $(4.8) | — | | Proceeds from property disposals | $0.8 | $13.1 | | Cash used in investing activities | $(85.6) | $(89.1) | Cash Flows from Financing Activities (Three Months Ended March 27, 2022 vs. March 28, 2021) | Item | March 27, 2022 (In millions) | March 28, 2021 (In millions) | | :--- | :--- | :--- | | Proceeds from revolving line of credit and long-term borrowings | $228.5 | $328.9 | | Payments on revolving line of credit, long-term borrowings and finance lease obligations | $(32.1) | $(235.3) | | Purchase of common stock under share repurchase program | $(27.0) | — | | Distribution from Tax Sharing Agreement with JBS USA Holdings | $(2.0) | $(0.7) | | Payments of capitalized loan costs | $(1.1) | — | | Cash provided by financing activities | $166.3 | $92.9 | [Reconciliation of Net Income to EBITDA and Adjusted EBITDA](index=46&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDA%20and%20Adjusted%20EBITDA) Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Three Months Ended March 27, 2022) | Item | Amount (In thousands) | | :--- | :--- | | Net income | $280,560 | | Add: Interest expense, net | $35,022 | | Add: Income tax expense | $75,219 | | Add: Depreciation and amortization | $102,142 | | **EBITDA** | **$492,943** | | Add: Foreign currency transaction losses | $11,536 | | Add: Transaction costs related to business acquisitions | $717 | | Add: Litigation settlements | $500 | | Minus: Insurance recoveries for Mayfield tornado losses | $3,815 | | Minus: Net income attributable to noncontrolling interest | $122 | | **Adjusted EBITDA** | **$501,759** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company details its exposure to market risks, including commodity prices, foreign currency exchange rates, and interest rates [Commodity Prices](index=48&type=section&id=Commodity%20Prices) - Pilgrim's is exposed to price fluctuations in feed ingredients (corn, soybean meal, soybean oil, wheat) and uses derivative financial instruments to mitigate this risk[247](index=247&type=chunk) Impact of Hypothetical 10% Increase in Feed Ingredient Prices (Three Months Ended March 27, 2022) | Item | Amount (In thousands) | Impact of 10% Increase (In thousands) | | :--- | :--- | :--- | | Feed purchases | $1,084,386 | $108,439 | | Feed inventory | $245,330 | $24,533 | | Net commodity derivative assets | $44,961 | $4,496 | [Interest Rates](index=48&type=section&id=Interest%20Rates) - A hypothetical **10% increase** in interest rates would decrease the fair value of fixed-rate debt by **$79.8 million** as of March 27, 2022[252](index=252&type=chunk) - Variable-rate debt constitutes approximately **20.3%** of total debt[253](index=253&type=chunk) - A **25 basis point increase** in interest rates would increase interest expense by **$0.4 million** for the three months ended March 27, 2022[253](index=253&type=chunk) [Foreign Currency](index=49&type=section&id=Foreign%20Currency) - The Company is exposed to foreign exchange rate fluctuations, particularly for the Mexican peso and British pound/euro, managing this by minimizing net monetary positions and using foreign currency forward contracts[255](index=255&type=chunk)[258](index=258&type=chunk)[260](index=260&type=chunk) Impact of Hypothetical 10% Change in Mexican Peso Exchange Rate (Three Months Ended March 27, 2022) | Item | Impact of 10% Deterioration (In thousands) | Impact of 10% Appreciation (In thousands) | | :--- | :--- | :--- | | Foreign currency remeasurement gain (loss) | $(4,124) | $5,041 | | Exchange rate of Mexican peso to the U.S. dollar (as reported) | 20.03 | 20.03 | | Exchange rate of Mexican peso to the U.S. dollar (hypothetical 10% change) | 22.04 | 18.03 | - A **10% weakening** of the U.S. dollar against the British pound would decrease the net assets of U.K. and Europe subsidiaries by **$260.5 million**, while a **10% strengthening** would increase them by **$318.3 million**[259](index=259&type=chunk) [Impact of Inflation](index=49&type=section&id=Impact%20of%20Inflation) - The U.S., Mexico, and most of Europe are experiencing pronounced inflation[262](index=262&type=chunk) - Pilgrim's is responding by negotiating with customers to recoup costs and focusing on operational initiatives to improve labor efficiencies, agricultural performance, and yields[262](index=262&type=chunk) [Forward Looking Statements](index=50&type=section&id=Forward%20Looking%20Statements) The company outlines various forward-looking statements, emphasizing that actual results may differ due to numerous risks and uncertainties - Forward-looking statements are subject to risks including the impact of COVID-19, commodity price fluctuations, supply chain disruptions, disease outbreaks, regulatory changes, competitive pressures, currency fluctuations, international market disruptions (e.g., Russia-Ukraine war), cyber-attacks, and litigation uncertainties[264](index=264&type=chunk)[267](index=267&type=chunk) - The Company does not undertake any obligation to update or address factors in future filings or communications[266](index=266&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section references Note 18 for detailed information on the company's ongoing legal proceedings and claims - Information on legal proceedings is incorporated by reference from Note 18, 'Commitments and Contingencies,' in Part I, Item 1 of this quarterly report[273](index=273&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) The company updates its risk factors, highlighting new risks related to the Russia-Ukraine war's impact on operations - The ongoing Russia-Ukraine war poses significant risks, including **higher prices for commodities**, increased inflation, and disrupted trade and supply chains due to supply disruptions from the Black Sea region[275](index=275&type=chunk)[276](index=276&type=chunk) - Sanctions and export controls imposed by governments against Russia and Belarus could adversely affect the Company's business, supply chain, or customers, and there is an **increased risk of cyberattack**[277](index=277&type=chunk)[278](index=278&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details its $200 million share repurchase plan, including shares repurchased during the quarter - On March 8, 2022, the Board of Directors approved a **$200.0 million share repurchase plan** with no termination date[279](index=279&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended March 27, 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of the Shares That May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | December 27, 2021 through January 23, 2022 | — | $— | — | $— | | January 24, 2022 through February 27, 2022 | — | $— | — | $— | | February 28, 2022 through March 27, 2022 | 1,158,452 | $23.3269 | 1,158,452 | $172,976,935 | | Total | 1,158,452 | $23.3269 | 1,158,452 | $172,976,935 | [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and corporate governance documents - Exhibits include the Cover Page Interactive Data File (Inline XBRL), Amended and Restated Certificate of Incorporation, Amended and Restated Corporate Bylaws, and Certifications of Principal Executive and Financial Officers pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[284](index=284&type=chunk)[286](index=286&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q report, duly authorized by Pilgrim's Pride Corporation - The report is signed by Matthew Galvanoni, Chief Financial Officer and Chief Accounting Officer, on behalf of Pilgrim's Pride Corporation, dated April 27, 2022[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 26, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File number 1-9273 PILGRIM'S PRIDE CORPORATION Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the ...

Pilgrim's Pride Corporation (NASDAQ:PPC) Q4 2021 Earnings Conference Call February 10, 2022 9:00 AM ET Company Participants Matt Galvanoni – Chief Financial Officer Fabio Sandri – President and Global Chief Executive Officer Conference Call Participants Operator Good morning and welcome to the Fourth Quarter and Fiscal Year 2021 Pilgrim's Pride Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note that the slides referenced during today's cal ...

Pilgrims Pride Corp (NASDAQ:PPC) Q3 2021 Earnings Conference Call October 28, 2021 9:00 AM ET Company Participants Matthew Galvanoni - SVP & CFO Fabio Sandri - President & CEO Conference Call Participants Operator Good morning, and welcome to the Third Quarter 2021 Pilgrim's Pride Earnings Conference Call and Webcast. [Operator Instructions]. Please note that the slides referenced during today's call are available for download from the company's investor website at ir.pilgrims.com in the Events and Presenta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q | | | For the quarterly period ended September 26, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File number 1-9273 PILGRIM'S PRIDE CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1285071 (State or other jurisdiction of incorporation or organization) 1770 Promontory Circle 80634-9038 ...

Pilgrims Pride Corp (NASDAQ:PPC) Q2 2021 Earnings Conference Call July 29, 2021 9:00 AM ET Company Participants Julie Kegley - Financial Profiles Fabio Sandri - President & CEO Matthew Galvanoni - SVP & CFO Conference Call Participants Benjamin Theurer - Barclays Bank Benjamin Bienvenu - Stephens Inc. Michael Piken - Cleveland Research Company Adam Samuelson - Goldman Sachs Group Peter Galbo - Bank of America Merrill Lynch Kenneth Zaslow - BMO Capital Markets Operator Good morning, and welcome to the Second ...

e Pilgrim's. Financial Results for Second Quarter Ended June 27, 2021 Pilgrim ilgrim's Pride Corporation great taste. All about great taste. Cautionary Notes and Forward-Looking Statements Statements contained in this press release that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim's Pride Corporation and its management are considered forward-looking statements. Without limiting the foregoing, words such as "anticipates," "believes," "estima ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q | | | ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File number 1-9273 PILGRIM'S PRIDE CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1285071 For the quarterly period ended June 27, 2021 OR (State or other jurisdiction of incorporation or organization) 1770 Promontory Circle 80634-9038 Greel ...

Financial Data and Key Metrics Changes - For Q1 2021, the company reported net revenues of $3.27 billion, an increase from $3.07 billion a year ago, with adjusted EBITDA of $254 million, representing a margin of 7.8% compared to 5% the previous year [52][53] - GAAP net income was $100 million, up from $67 million in the prior year, while operating margins were 3.4% in the U.S., 19% in Mexico, and 1.2% in Europe [53] Business Line Data and Key Metrics Changes - In the U.S., adjusted EBITDA was $131 million, down from $137 million a year ago, impacted by higher operating costs due to COVID-19 mitigation and increased grain costs [53][54] - Mexico achieved adjusted EBITDA of $86 million, a significant improvement from a loss of $17 million in the prior year, driven by favorable supply-demand dynamics [55] - European operations generated approximately $37 million in adjusted EBITDA, down from $45 million last year, affected by higher feed costs and COVID-19 impacts [56] Market Data and Key Metrics Changes - The U.S. market saw a rebound in demand for large bird deboning due to improved foodservice demand, while commodity prices remained high [54][55] - In Mexico, the market remains favorable with strong results compared to a challenging Q1 of 2020, driven by balanced supply and demand [27][55] - European operations faced challenges due to higher feed costs and export constraints, but are expected to recover as costs stabilize [30][56] Company Strategy and Development Direction - The company aims to maintain a diversified portfolio and improve operational efficiencies to respond to market dynamics and achieve relative performance over competitors [11][15] - Investments in automation and strategic wage increases are part of the long-term strategy to address labor shortages and improve operational challenges [21][78] - The company is committed to achieving net zero greenhouse emissions by 2040 and has issued a $1 billion sustainable linked bond to support this initiative [48][49] Management's Comments on Operating Environment and Future Outlook - Management noted that the gradual easing of COVID-19 restrictions is leading to improved market conditions, particularly in foodservice [16][46] - The company expects continued strong demand for chicken, especially during the summer grilling season, and anticipates a significant increase in profitability compared to the previous year [72][73] - Labor availability remains a challenge, but the company is actively addressing this through wage increases and automation investments [75][78] Other Important Information - The company reported a strong liquidity position with over $1.2 billion in cash and available credit, and a net debt of $1.9 million with a leverage ratio of 2.2x [58][59] - The company is focused on optimizing its capital structure while pursuing growth strategies and maintaining shareholder value [60] Q&A Session Summary Question: Sustainability of strong performance in Mexico - Management indicated that the supply-demand balance in Mexico has been favorable, but volatility is expected as small players may return to the market [64][66] Question: Sequential profitability trends in the U.S. - Management noted a continued increase in profitability from January to March, with expectations for strong performance in Q2 due to seasonal demand [68][72] Question: Labor availability and stimulus impact - Management acknowledged labor shortages due to stimulus payments and is implementing strategies to attract and retain workers [75][78] Question: European feed cost dynamics - Management explained that while feed costs have increased, pricing models incorporate these costs, and margins are expected to recover over time [81][84] Question: Management of feed costs and purchasing strategy - Management confirmed a flexible strategy for managing feed costs, adjusting positions based on market risks [87][89] Question: Impact of foodservice recovery on retail business - Management expressed confidence in the diversified portfolio, indicating that both foodservice and retail segments can thrive simultaneously [91][92]